Brand Valuation as a Management Tool

Alex Batchelor

Brands summarise a company's value for a customer – and that perception drives profit. In a way this is common sense, but it has been statistically proved by databases such as PIMS (see Figure 1). The data show that if customers think you are much better at delivering value than your competition you seem to make more money over the long term. Hardly a startling observation but not as widely acted on as it should be, which is worrying for the delivery of long-term shareholder value.

WHY DO WE VALUE BRANDS?

We know that, as a generalisation, brands are valuable. But why do companies try to put an exact price on them? There are three very clear reasons.

The most urgent is usually accountancyrelated such as tax, buying or selling a business, or raising some money. Brands represent a big chunk of money in most businesses today and somebody has to put a price on them from time to time, for different purposes.